The Big Short

Mar 1st, 2016 1:00 pm
60 Pesos
Discussion with Betsy Bowman

It’s 2016 and the global economy is still suffering from the housing crash of 2008.  “Did no one see this coming?” was the refrain heard from Buckingham Palace to Timbuktu.  Well, actually a few people did see it coming.  “The Big Short” chronicles four small groups of rogue traders who did see the crash coming and bet on it, or rather bet against it.  This 2015 docu-drama is adapted from the 2010 Michael Lewis book of the same name.  
Our first protagonist, an MD turned financial advisor/rogue trader, as early as 2006 actually looked at the individual mortgages making up Mortgage Backed Securities (MBS) being sold in the capital markets and was shocked to see how many of them were in arrears.  He knew that when the ARM mortgages reset the interest rates to higher rates in 2007 that millions of people would not be able to pay and the banks would foreclose on their mortgages making the mortgage backed securities fail.  So he wanted to “short” them, i.e. to bet against them.  With about $500 Billion in MBSs sold on the capital markets, he went to Wall St. to find an investment firm that would set up a vehicle by which he could “short” $100 million or $200 million of these MBSs.  
Our second set of protagonists, two young math whizzes working in their parents’ proverbial garage were gambling in the stock market.  They had turned a $110,000 initial investment into $30 million and had their sights set very high.  They were laughed off by the Wall St. guys, but a friend and former investor-guru helped them when they inadvertently discovered the weakness in the mountains of MBSs on the market.  
Our third protagonist, a true believer in capitalism and stock markets who wanted to right the world, was tipped off by a call to a wrong phone number in his office.  He tracked the caller down and learned of the scam that was being perpetrated, i.e. worthless home mortgages were being bundled into securities and sold on the capital markets as AAA bonds.  He and his small group of rogue traders also shorted the MBSs.    The fourth protagonist, the caller to the wrong number, worked with a small group of rogue traders in a European bank and was on to the same scam.  He was shorting the housing market.  
The intertwined tales of these four sets of traders show that some did see the crash coming but most preferred to laugh all the way to the bank knowing that they wouldn’t be caught short (no pun intended).  This is yet another docudrama that covers the insanely complex tale of how home mortgages crashed the world economy.  We have yet to see a documentary on the $13 trillion dollar bail-out plan that Hank Paulson and Ben Bernanke engineered to save the banks while sacrificing Main St., America.

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